One interesting tidbit: Influencers on Tiktok and Instagram are driving sales to brick and mortar stores.
Industry experts say Tallahassee’s commercial real estate market is performing well on most fronts with several new projects on the horizon.
Yet, there’s hesitation and impacts created at the federal and state level that are trickling down to the capital city.
From renewed interest in office space following the COVID-19 pandemic, new restaurants and student housing, the 5th Annual Commercial Real Estate Update touched on the most significant impacts in the market, including increases in taxes and insurance rates.
Ed Murray, president and principal at NAI TALCOR, described the overall market as “jittery” and said there’s overall caution over embarking on big projects anytime soon.
“It’s jittery because of DOGE (Department of Government Efficiency created by President Donald Trump), because of high inflation, because of interest rates that we we had hoped would tick down,” Murray said, adding tariffs are another factor. “If you don’t have to make a decision, you’re not making a decision right now. That’s going to calm down. It’s going to be fine, but that’s the issue right now.”
Retail market is tight
NAI TALCOR Commercial Real Estate Broker Debbie Ashlin said there’s little to no vacancy in the retail market at this time.
“It’s a good thing,” she said. “Why is that? Because we really don’t have any new construction, except for a few buildings.”
She said several retailers are downsizing their footprint and pointed to examples like Burlington Coat Factory, which went 45,000 square feet to 20,000 square feet.
Or, she said, retailers looking to maximize the most space possible by offering experiences, such as rock climbing at Dick’s Sporting Goods, as a means of competing with online ecommerce titans like Amazon.
In addition, Ashlin said many traditional mall tenants are leaving places like Governor Square mall.
“There’s probably four national retailers that I’ve spoken with that said if they can’t find a location outside the mall, they’re leaving the market,” Ashlin said.
She also said influencers on Tiktok and Instagram are driving sales to brick and mortar stores. One example, she said, customers can go on the Sephora or Ulta Beauty app or website and have a delivery sent to their house within an hour or use at-store pickup or curbside service.
“Some of these retailers that I’m talking to say they want to leave the mall. They would love to be at a Whole Foods or Target shopping center,” Ashlin said. “But we’re 100% leased there, so that won’t happen.”
Insurance rates show slight improvements
When it comes to insurance, the bottom line is this: As long as the state experiences natural disasters and property values continue to rise, impacts will continue.
Murray said insurance are showing slight improvements compared to recent years but remain relatively high.
“We think only a 16% increase is good this year in insurance, because it’s been 20 or 30 in the past,” Murray said. “Taxes have gotten better. So we’re going to keep tracking that. I’m sure you guys are all feeling it, whether it’s in your house, in your office building or your warehouse.”
Takeaways on Tallahassee’s office space market
Demand for office space is on the rise, particularly in the last six to eight months.
John McNeil, another principal and commercial real estate broker at NAI TALCOR, described the hesitancy many had for engaging in long-term leases in the last four to five years as a direct result of the pandemic.
“I probably did more 12-, 24-, 18-month lease extensions than I’ve done in my entire career,” McNeil said. “People just weren’t making long term decisions when it came to their office space. They were kicking the can down the road.”
Now, he said, his firm is executing leases ranging from three to 10 years again.
Another key point: With less new construction taking place for office space in high-desired areas, such as downtown and northeast Tallahassee, demand is getting tighter and tighter.
Several new student housing projects in the pipeline
Slaton Murray, another principal and broker at NAI TALCOR said student housing projects, particularly near Florida State‘s campus aren’t slowing down.
“So I know you’re asking yourself, and the answer is yes, they’re still building more student housing,” Murray said. “The second question you’re probably asking is, ‘Are they going to continue to do it?’ And the answer is also yes.”
He said FSU’s Legacy Hall, which is home to the university’s College of Business, sees about 9,000 students coming and going every week there. The university is shifting its business school from Tennessee Street to property near the Tucker Civic Center off Gaines Street.
That shift has triggered new student housing projects. The Hall, a student-housing project with 115 units and The Hall II with another 76 units, both are slated to be complete next year.
Slaton Murray said the new student housing projects on and near Gaines Street represent about 12,000 new beds added to the market, including several projects led by the 908 Group: The Hall and The Hall II, the Chapter House and Chapter House II.
He said projects led by the 908 Group alone represent a more than $220 million investment by the company.
“That’s a lot of investment coming to our community,” Murray said. “We’re very grateful for it.”
Restaurants face challenges from bird flu, football
Two of Tallahassee’s major restaurateurs offered insight on what they’re seeing in the hospitality industry.
Brad Buckenheimer, owner of Canopy Roads Café locations in Tallahassee and a partner in Midtown eatery Lemon & Thyme, talked about the headaches brought on by the egg shortage felt throughout the country.
“It’s challenging,” he said, adding how bird flu is driving prices up. “My wife said I should be an ornithologist in my next life, because I know so much about birds and eggs at this point.
“I’m sure some of you know Waffle House decided to add a surcharge for eggs. I thought that was a little misleading, because everything that I’ve been told by some of the shelled egg providers is there’s no relief coming within the next eight to 12 months.”
Buckenheimer said there’s a 20-month incremental high for egg demand and likened the surge to those seen during the pandemic, using the stockpiling of toilet paper as an example.
“So it’s increasing the demand for eggs,” he said, adding the surcharge some restaurants are charging may be in place for a while.
Matt Thompson, owner of Madison Social and Township, along with Social Catering, talked about how a winning football season at Florida State is great for business in his industry.
But, he quickly added, since 2023 revenue is down $500,000. The Seminoles had a rough 2024 football season, finishing with a disappointing 2-10 record overall and 1-7 in ACC play, ranking last in the conference.
“That’s just our two stores and that’s just on Fridays and Saturdays,” he said. “There’s a hangover effect that happens in Tallahassee … Sundays and Mondays feel different after a loss, and we see it certainly down in our area where students particularly don’t want to go out.”
Contact Economic Development Reporter TaMaryn Waters at tlwaters@tallahassee.com and follow @TaMarynWaters on X.
